Sacramento Kings Chairman Vivek Ranadive: My trip to India with Obama

Last month, the White House invited me to join President Barack Obama on a trip for India’s Republic Day. Since I have no political affiliations (I call myself an “American”), I saw this as an opportunity to be part of history. As a boy from Mumbai who came to Boston as a teenager with $50 in his pocket, I owe everything to America. To visit the country of my birth with President Obama was a privilege and an honor I simply could not refuse.

Months earlier, I witnessed history when I watched India’s Prime Minister Narendra Modi galvanize 20,000 cheering Indian-Americans at Madison Square Garden. My daughter Anjali sang the national anthem, and while I was there to support her, I was also curious to get a firsthand look at the new leader who had taken India by storm. I was impressed with Prime Minister Modi’s combination of vision, values, action orientation and humility.

Shortly after accepting the invitation, Honeywell’s HON CEO Dave Cote reached out to me. Cote had been Co-Chair of the US-India CEO Forum for 10 years, and I was delighted to learn that my friends PepsiCo PEP CEO Indra Nooyi, MasterCard MA CEO Ajay Banga, Westinghouse Electric CEO Daniel Roderick and other executives would be part of the delegation. In other words, I would be the underachiever on this road trip.

The delegation arrived in Delhi in the early hours of Saturday from different locations – Indra, Ajay and myself directly from Davos.

Over lunch, Cote guided the delegation as we crafted a working paper on how best to increase trade; in Silicon Valley speak, in a “nonlinear” fashion. The goal was to expand trade between the two countries from $100 billion a year to $500 billion a year over the next decade. Not an unrealistic target, considering China’s trade with the U.S. is currently over $500 billion a year. There was also the matter of resolving liability issues around nuclear energy, which both sides were keen to accomplish.

Each of us contributed to the working paper based on our backgrounds and expertise, and I focused on technology and infrastructure. While it is great to have brilliant software engineers in India, if it takes hours to commute and they have limited Internet access, then productivity is severely limited. Wearing my Sacramento Kings hat, I lamented the fact that India currently does not have an NBA-class arena to serve as a galvanizing force and civic space in the community. Indeed, Prime Minister Modi has a dream of creating smart cities, and arenas should be central to that project. This is not a new idea – after all, cities have been built around coliseums for thousands of years.

Sorenson wanted to open hotels, and he explained how it took at least 106 permits in India and just six in Singapore. Roderick had spent six months in India trying to build nuclear reactors and provide employment to tens of thousands. Iger talked about how pirated movies were robbing both local and overseas content creators of large revenue streams. Infrastructure, refrigerated food supply chains and consistent regulations that adhere to global standards were the core issues summarized in our working paper.

The trip was not without its glamorous moments. New Delhi was lit up for the world, as we proceeded throughout the city in the official motorcade. It was a sight to behold: business titans in a minivan taking pictures like school children. We took pictures at the Secretariat Building and met up with other members of the president’s delegation. I was proud to see fellow Californians – U.S. Congressman Ami Bera (D-Calif.) and House Minority Leader Nancy Pelosi (D-Calif.).

While the meetings with Prime Minster Modi, President Obama and the Indian delegation were special, I cherished the small dinner Commerce Secretary Penny Pritzker organized with the president. She left no doubt that while there were always hurdles, we would grow and improve the U.S.-India relationship. We talked late into the night about the trip, culture, art, geopolitics and, of course, my Sacramento Kings. The president had vast and deep knowledge on a variety of subjects, and I asked for his help in getting “Boogie” (DeMarcus Cousins, my team’s center) on the NBA All-Star team.

As the trip ended, I reflected on how proud I am to be an American. Our business leaders are the finest in the world. I believe there will be a shift in India to a postcolonial, post-socialist country strongly aligned with the United States. We will quintuple trade with India over the next decade. India will become one of America’s most important partners in the 21st century and finally achieve its full potential.

Vivek Ranadive, Chairman and Owner of the Sacramento Kings and Founder of TIBCO Software, Inc.

Pepsi and Peltz call a truce—and here’s who wins

Score one point for activist investor Nelson Peltz in his crusade against women-led corporate giants. PepsiCo CEO Indra Nooyi has added Bill Johnson, a former Heinz CEO and now an advisory partner with Peltz’s hedge fund, to join Pepsi’s board.

The move marks a truce between Peltz and Nooyi, who, as I reported Monday in a story about Peltz’s seeming fetish for Fortune 500 companies run by women, has vigorously rebuffed a long-running Peltz campaign to split PepsiCo PEP into separate snack and beverage companies. One of his ideas is to combine Frito-Lay, Pepsi’s snack unit, with food conglomerate Mondelez MDLZ, which is headed by Irene Rosenfeld.

By adding a Peltz adviser to her board, Nooyi wards off the danger of the billionaire corporate raider staging a noisy proxy fight for director seats this spring—as Peltz is now doing at DuPont DD. DuPont also has a female CEO, Ellen Kullman.

“Bill will bring deep expertise and insight to the PepsiCo board as we continue to innovate and drive profitable long-term growth,” Nooyi said in a statement.

Indeed, Johnson figures to be a good addition to the Pepsi board. A food-industry veteran born and bred to win (his father was Bill “Tiger” Johnson, who played center for the San Francisco 49ers and later coached the Cincinnati Bengals) spent 31 years at Heinz and became CEO in 1998. He also fought his own proxy battle with Peltz before selling Heinz to Warren Buffett and 3G Capital for $23 billion in 2013. Once Peltz’s foe, Johnson has now befriended him, and he joined Peltz’s firm as an advisory partner last summer.

While Peltz scored by getting one of his guys a seat as an independent Pepsi director, Nooyi, under pressure, may end up scoring even better for herself and her shareholders. John Faucher, an analyst who covers PepsiCo for J.P. Morgan, notes that while “a breakup of PepsiCo is highly unlikely, Johnson’s presence on the board will keep it in discussion,” and the former Heinz chief will press for cost savings. With Johnson at her director’s table and with her stock outperforming the S&P this year, Nooyi prevents a disruptive proxy war—in the short-term, at least—and adds an industry pro who could help her sustain PepsiCo’s turnaround.

Benched: Beats by Dre and the other big brands banned by the NFL

In the startup world, lawsuits from ousted co-founders are commonplace. So perhaps it was inevitable that shortly after Beats Electronics (better known as Beats by Dre) inked a deal to sell to Apple for $3 billion, a lawsuit would come along. Last week, cable-maker Monster Inc. and its founder Noel Lee, an early partner of Beats, filed suit against Beats alleging that Dr. Dre (real name: Andre Young) and Interscope chairman Jimmy Iovine duped Lee out of his 5 percent stake in the company.

It was the kind of press that Dre, Iovine, Beats and Apple AAPL certainly don’t want. And another apparent bump in the road for Beats came in October when the National Football League signed a new deal to make Bose the exclusive headset provider of the league. That meant that Beats by Dre headphones—endorsed in commercials by a number of football stars—are effectively banned from NFL games, locker rooms, press conferences, and official events.

But what may seem like bad news has proven to be the opposite for Beats. Getting “banned” has created added cool-factor and credibility for the product. (Iovine has said about the ban, “I can’t believe I’m this lucky.”) Those NFL players that advertise for Beats (including 49ers quarterback Colin Kaepernick, Seahawks cornerback Richard Sherman, and Cowboys wide receiver Dez Bryant) have continued to wear the headphones, despite risk of the $10,000 league fine for non-approved apparel. (The NFL slapped Kaepernick with the fine in mid-October.) Even players who are not official endorsers of the company have defied the rule: Tom Brady wore Beats earbuds on the field during his warmups before an October game against the Bills. (He was not fined, perhaps because it isn’t as flagrant as wearing them at a postgame press conference, as Kaepernick did.)

It is also likely that when a player is fined, Beats reimburses him. When asked if this happened in his case, Kaepernick replied, “We’ll let that be unanswered.” Regardless, it’s clear that being “banned” by the league has not damaged the brand, and in fact may have even strengthened it.

Similar to the situation with Beats, a number of other prominent apparel or beverage brands have been effectively banned by the NFL because a competitor brand has an exclusive deal. Here are some of the biggest.

7 CEOs who will be in the hotseat in 2015

A new year indicates a fresh start, but for CEOs in the Fortune 500 and beyond, 2015 will be a pressure cooker as their attempts to turn around struggling businesses or mend damaged brands are put to the test.

Here are 10 of the best dressed CEOs in the U.S.

The CEOs of the country’s top companies certainly have the means to dress as well as they want, but money doesn’t necessarily translate to fashion. While looking the part of a leader is one of a CEO’s priorities, the finer points of fashion are often lost on someone leading a Fortune 500 company. Yet if a CEO has a personal style, it can send a positive message. And it’s not a matter of shelling out for the priciest designer goods. An executive’s suit may have cost $6,000, but if it’s not tailored for the best fit, it’s not going to look sharp.

Despite the prevalence of the Silicon Valley aggressively casual CEO look, in the ranks of the Fortune 500 the suit still matters — for both male and female CEOs. And within this group, a few business leaders stand out with a certain “look.”

PepsiCo CEO says bigger is better in wooing Wal-Mart, other retailers

Some have argued that the snacks-and-beverage company is a lumbering giant that would benefit from splitting itself in two. But CEO Indra Nooyi argues that the company’s broad portfolio of products and size make it even more important with retailers desperate to bring shoppers into their stores. And that is one key reason PepsiCo should stay together, Nooyi said on Monday at the Beverage Digest industry conference in New York.

“Our portfolio works, we have scale. We go to large retailers and talk about how to drive our collective business. We generate a lot of cash for retailers because we are in high velocity categories, and so retail CEOs want to sit down and talk with us,” Nooyi said.

Activist investor Nelson Peltz has been agitating for a long time to get PepsiCo PEP to split off its booming snacks business, saying its slower growing beverage business is impeding its food division, which includes Frito-Lay and accounts for 52% of sales.

PepsiCo has repeatedly rebuffed Peltz and, earlier this year, issued the results of a long strategic review finding that splitting the two businesses would lead to lost synergies, a conclusion Peltz has dismissed.

Nooyi reminded industry analysts that PepsiCo has been an integrated company for half a century. Some of the pressure on PepsiCo to consider a split has eased off, thanks to strong results this year, which has in turn spurred the company’s stock performance. PepsiCo shares are up 18% this year, compared to about 8% for the S&P 500.

But Peltz is patient and he could renew his push for a split.

Nooyi was quick to point out that the beverage-snack combination has made PepsiCo crucial to its customers, given that major retailers like Wal-Mart Stores WMT, Walgreen WAG, and Target TGT are struggling with stemming declines in customer visits to their stores. Indeed, PepsiCo has climbed the ranks among consumer and products companies that are important to retailers, according to Kantar Retail.

What’s more, beverages, because of their weight, are not a product category that lends itself easily to e-commerce, so customers are more willing to make their way to brick-and-mortar locations to make such purchases, Nooyi said. Bags of chips contain plenty of air and are also cumbersome to ship via e-commerce platforms. “Put the two together and we are the single largest traffic driver [to stores],” Nooyi said.

“Last week, I was at a meeting with Wal-Mart,” Nooyi said. “I don’t think the Wal-Mart CEO is going to spend time with me if PepsiCo is not so big and so important.”

Finding innovative ideas in unexpected places

A few years ago, executives at PepsiCo gave the R&D department a challenge: Find a way to cut the sodium content of snack foods, while still keeping the salty taste consumers crave.

After toiling away in their own labs and searching across the packaged-foods industry for ideas, the scientists found what they were looking for — in a global research lab that was studying osteoporosis.

What do salty snacks and bone disease have to do with each other? Nothing, except when it comes to so-called open innovation. The osteoporosis researchers had developed a way to create nanoparticles of a low-sodium, salt-like substance by “smashing calcium into tiny particles and re-growing it,” says Andy Zynga, CEO of innovation firm NineSigma. That gave PepsiCo’s food scientists a whole new perspective on the task, so “the company went on to solve its problem in a truly innovative way.”

PepsiCo isn’t the only one to have based a big innovation on an idea that originated in a totally different business, for a different purpose altogether. Procter & Gamble, for instance, found a way to reduce the wrinkles in shirts fresh out of the dryer by starting with a polymer invented by a computer chip expert at a European university.

Zynga, whose firm counts Xerox, Pfizer, Kraft, Siemens, and many other heavy hitters among its clients, says any company can make profitable use of ideas from other, seemingly unrelated fields. The first step in what’s commonly called open innovation, he says, is to reframe the question of what you’re looking for.

“State the problem in its most basic form,” he suggests. In P&G’s case, instead of looking for ideas on, say, “how to make fabrics less wrinkly,” the company put the word out that it sought proposals on “relaxing surface tension of an organic material.” Expanding the definition of the goal “lets you cast a very wide net, so you can find workable solutions in places you might never have thought of looking,” Zynga says.

NineSigma has built a database of more than 2 million companies, nonprofits, and university labs worldwide, where its teams of consultants search for useful technologies on clients’ behalf, but Zynga maintains that anyone with a tricky problem to solve can do something similar.

“Start with a basic problem statement that doesn’t limit you to your own industry,” he suggests. “Then, go and talk to suppliers, customers, and universities. Some of our clients have technology scouts who are constantly going to conferences to talk with experts in other fields, to see what they can apply to improving their own products.” The more varied technologies you have to choose from, he adds, the better your chances of “advancing above and beyond what your competition is doing.”

That’s not to say that an innovation from elsewhere will always be welcome in-house. One obstacle to open innovation is a cognitive bias that psychologists call “functional fixedness,” meaning that a company’s own R&D experts “can’t get past the way they have always looked, and where they have always looked, for solutions,” Zynga says. “Ironically, the more success they’ve had with their usual approach to a problem, the harder it is to imagine a totally different one.”

To change that, Zynga suggests appointing what he calls “a functional fixedness SWAT team — a group of innovators who embrace the idea of collaborating with others outside industry walls.” He’s seen such teams unearth enough helpful ideas from surprising sources that they’ve inspired their colleagues to “evolve from a closed loop to an open one.”

What you need to know: While Pepsi’s PEP results broadly beat Wall Street’s expectations, revenue growth was pretty minimal. Net revenue only grew 2% on a reported basis, with volume of snacks and beverages each rising only 1%. Pepsi CEO Indra Nooyi has told analysts that people these days are consuming differently, with the trend toward fresh produce and making food at home rather than buying the packaged foods and beverages items that companies like Pepsi sell. Fast-growing items such as yogurt, fruit and meat are mostly out of the beverage giants’ comfort zones. And demand for carbonated soft drinks, the biggest category in the beverages business, has suffered a nearly decade-long slide.

The big number: $1.36 — that’s the per-share adjusted profit Pepsi reported for the quarter ended September 6, and it is far above the $1.29 a share projection by analysts surveyed by Bloomberg. Overall revenue also exceeded expectations, at $17.22 billion versus the projection of $17.08 billion. Pepsi also notably slightly raised its earnings growth projection for the fiscal year.

What you might have missed: There was some regional choppiness in Pepsi’s latest results. Revenue climbed in the double digits in the Latin America foods and Asia, Middle East and Africa regions, but growth was far more modest in Europe, where beverages volume declined. The North America snacks business reported a 3% jump in revenue, helping offset a drop for Quaker Foods. The Americas beverages business — a closely watched segment–reported flat revenue as Pepsi claimed to have maintained its market share.

A new cola war? Pepsi adds to mid-calorie soda arsenal

PepsiCo PEP has a new weapon in the mid-to-low-calorie cola wars: a soda sweetened naturally with stevia.

The world’s second-largest beverage maker said on Wednesday it was introducing a new cola, called Pepsi True, that is sweetened naturally with real sugar and stevia leaf extract and holds 30% less sugar than regular Pepsi, its latest move to win back consumers cutting back because of high calories and the perception that artificial sweeteners are dangerous to the health.

Pepsi’s announcement comes just a few weeks after Coca Cola KO started test-marketing a naturally-sweetened, stevia-based, low-calorie soda of its own, called Coca-Cola Life. Both products have green cans, much like Zevia, a small maker of naturally sweetened soda that has nimbly inserted itself into a corner of the market both PepsiCo and Coke were slow to dive into. The big soft drink makers had hesitated to go too far into a niche market for fear of hurting still-big sales of their diet sodas.

Pepsi True, the company’s first mid-calorie soda since Pepsi Next two years ago, will be sold exclusively on Amazon.com AMZN starting in the middle of this month. The product will be sold on Amazon only at first so that PepsiCo can “incubate a niche product like Pepsi True in the e-commerce space” before being sold in stores next year, a spokeswoman told Fortune.

Beverage companies are eager to find new products to stem sales declines for sodas: In the first half of 2014, U.S. sales of diet carbonated soft drinks fell 7.5%, according to Beverage Digest. And so stevia, which contains almost no calories, has emerged as a possible cure-all (even though it leaves an aftertaste, hence the addition of natural sugar, and is not for everyone) in the low-to-middle calorie part of the industry.

This is not Pepsi’s first stevia-based drink: the company launched Next in a few markets in 2012. (PepsiCo launched Sobe Lifewater with stevia in 2008.) But Pepsi Next, which is still on store shelves but has not sold particularly well, has a mix of three artificial sweeteners and high fructose corn syrup. A company executive, Simon Lowden, chief marketing officer for PepsiCo’s North American beverage unit, told the Associated Press that he imagines Pepsi Next will eventually be phased out in the U.S.

Dr Pepper Snapple DPS is currently testing three naturally sweetened versions of Dr Pepper, 7up, and Canada Dry, with stevia and sugar, in three markets. Food companies are also getting in on the action: General Mills GIS has said it would reformulate its Yoplait yogurt with stevia.

Why it’s so hard for Aunt Jemima to ditch her unsavory past

Change doesn’t come easy. For popular brands even with controversial images, that seems to be especially true.

The most obvious example is the Washington Redskins football team, which has been embroiled in controversy recently for refusing to change its name despite claims that it is demeaning and prejudicial towards Native Americans.

A lawsuit filed in Chicago federal court last week pointed to another prominent instance of branded racism. The great grandsons of the woman who assumed the role of Aunt Jemima in 1935 accused several companies of benefiting from her likeness without paying for it.

In a class action lawsuit, D.W. Hunter and Larnell Evans claim that PepsiCo Inc. PEP, its subsidiary Quaker Oats Co. (which sells Aunt Jemima syrup), and Pinnacle Foods (which makes Aunt Jemima frozen pancakes) schemed to deny that their great grandmother, Anna Short Harrington, had worked for Quaker Oats while refusing to pay her royalties for 60 years, as products bearing her image brought in millions of dollars in sales.

Quaker Oats declined to discuss the details of the lawsuit but said in a statement that the company believes it has no merit. Pinnacle PF said that it has a policy of not commenting on pending litigation. (Hillshire Brands HSH is also named as a defendant. The complaint characterizes the firm as Pinnacle’s merger partner, but that deal never went through. The company declined to comment.)

Beyond the eye-popping sum that the plaintiffs are seeking—$2 billion, plus punitive damages to be determined at trial—the lawsuit is notable for its chronicling of the alleged exploitation of Harrington and her fictitious character’s unsavory past.

The lawsuit alleges that Quaker Oats recruited Harrington as she cooked pancakes at the New York State Fair, after which the company used her recipes and trademarked her likeness as Aunt Jemima. A November 1935 ad in Woman’s Home Companion magazine that pictured Harrington’s likeness in a red bandana appeared with the title “Let ol Autie sing in yo’ kitchen”—a headline that the plaintiffs say capitalized on Harrington’s Southern accent and distinct dialect, which stems from the Gullah Geechee culture that was prevalent in South Carolina.

“Throughout the 1930s, the bulk of Aunt Jemima advertising continued to concentrate on the romantic world of ‘plantation flavor,’” the lawsuit says. It also alleges that the defendant companies racially discriminated against Harrington and her family—treatment that reflects “an innate form of disrespect toward African American people in general.”

Indeed, the Aunt Jemima character has long come under fire for its racist past. In a 2007 interview with NPR, Maurice Manring, author of Slave in a Box: The Strange Career of Aunt Jemima, said that the marketing of Aunt Jemima came of age in an era when middle-class housewives were not able to employ black maids as easily as they once did. The ads targeted the nostalgia for those earlier days. “You can’t have Aunt Jemima today but you can have her recipe and that’s the next best thing,” Manring said, explaining the ads. “And so what we’re talking really about is trying to ease the transition from having someone do something for you to doing it yourself, and that’s where the slavery nostalgia was particularly effective,” he said.

Though Aunt Jemima has evolved over time—most recently in 1989, according to Quaker Oats—she still stands as a blatant reference to American slavery, so why is her likeness still on store shelves?

Quaker Oats told Fortune that the Aunt Jemima brand has been around for more than 125 years and “is neither based on, nor meant to depict any one person.” The company says that, based on its ongoing dialogue with consumers, it knows that Aunt Jemima “invokes a sense of caring, nurturing and comfort—qualities revered by families around the world. We stand by this heritage as well as the ways in which we do business.“

There’s little doubt that, to the critical consumer, Aunt Jemima tip-toes—if not fully crosses—the politically correct line. But there’s also no question that, from a business perspective, when it comes to trying to rectify this staple brand with today’s social standards, Quaker Oats and parent PepsiCo have a lot to lose.

It is quite possible that Quaker Oats’ claim is accurate: the everyday consumer doesn’t interpret Aunt Jemima as a symbol of the racism of postbellum America, but instead sees her image as a stamp of authenticity and heritage. And in that case, it’s easy to see why Quaker Oats is so hesitant to part with the brand: those two characteristics carry a lot of weight in the crowded food category, where players are fighting to distinguish their brand from the next, says Allen Adamson, chairman of the North America region of branding firm Landor Associates.

It is hard to beat a brand with a genuine history, especially with today’s consumer, who is too sophisticated to buy into a made-up story. Though having such a brand story becomes a “tricky challenge,” when that heritage is no longer socially acceptable, Adamson says.

It’s a challenge that a brand like the Redskins is actually better positioned to overcome. As one of the National Football League’s 32 teams, it’s already unique enough. “People would go to games if you called them the Redskins, Blue Skins, or No Skins,” Adamson says.

Such a change won’t be as easy for Aunt Jemima, though.

“The trouble is, once you drop her and her name, then you’re left with a generic syrup that’s no different from the store brand,” Adamson says. Sure, Quaker Oats may argue that its syrup tastes better, but taste is no good for a customer in a grocery store making a purchase based on looks alone. A brand’s image and the story it tells is “a shortcut for decision making,” Adamson says.

If Quaker Oats were to revamp its syrup brand, a name overhaul would cost between $100,000 and $200,000. That’s the easy part, Adamson says. Getting the name in front of enough eyeballs and into enough brains that it means something is far more difficult and expensive; in the $20 million to $50 million range.

“It’s hugely challenging,” he says. So much so that, in Aunt Jemima’s case, you may be better off starting a new business from scratch.